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Weekly Address: Learning from History to Reform Wall Street

Posted by Jesse Lee on December 12, 2009 at 12:00 AM EST

The President explains that while he continues to focus on jobs, it is also profoundly important to address the problems that created this economic mess in the first place. He commends the House of Representatives for passing reforms to our financial system, including a new Consumer Financial Protection Agency, and blasts Republican Leaders and financial industry lobbyists for their joint “pep rally” to defeat it.

Let’s take a look at how members of the House from Missouri voted on the bill:

FINAL VOTE RESULTS FOR ROLL CALL 968

(Democrats in roman; Republicans in italic; Independents underlined)

     H R 4173      RECORDED VOTE      11-Dec-2009      2:28 PM

     QUESTION:  On Passage

     BILL TITLE: The Wall Street Reform and Consumer Protection Act of 2009

—- AYES    223 —

Carnahan

Clay

Cleaver

—- NOES    202 —

Akin

Blunt

Emerson

Graves

Luetkemeyer

Skelton

[emphasis added]

Okay, what’s with that?

The bill summary (as introduced}:

H.R.4173

Title: To provide for financial regulatory reform, to protect consumers and investors, to enhance Federal understanding of insurance issues, to regulate the over-the-counter derivatives markets, and for other purposes.

Sponsor: Rep Frank, Barney [MA-4] (introduced 12/2/2009)      Cosponsors (None)

Related Bills: H.RES.956, H.RES.964, H.R.3126, H.R.3818

Latest Major Action: 12/11/2009 Passed/agreed to in House. Status: On passage Passed by recorded vote: 223 – 202 (Roll no. 968).SUMMARY AS OF:

12/2/2009–Introduced.

The Wall Street Reform and Consumer Protection Act of 2009 – Financial Stability Improvement Act of 2009 – Directs the Comptroller General to audit and report to Congress on all actions taken by the Board of Governors of the Federal Reserve System (Federal Reserve Board) and the Federal Reserve Banks during the current economic crisis pursuant to specified authority granted under the Federal Reserve Act.

Establishes a Financial Services Oversight Council, consisting of the heads of specified federal financial regulatory bodies and chaired by the Secretary of the Treasury, to: (1) resolve a dispute among two or more federal financial regulatory agencies in specified circumstances; (2) subject a financial company to stricter prudential standards; and (3) require a financial holding company to undertake one or more mitigatory actions to address any grave threat its activities pose to the financial stability or economy of the United States.

Directs the Federal Reserve Board to impose stricter prudential standards on a financial holding company in certain circumstances.

Authorizes the Council to subject a financial activity or practice to stricter prudential standards for financial stability purposes.

Amends the Home Owners’ Loan Act to establish a Division of Thrift Supervision within the Office of the Comptroller of the Currency. Abolishes the Office of Thrift Supervision, and transfers its functions and personnel to the Division.

Amends the Revised Statutes of the United States to direct the Secretary to appoint up to five Deputy Comptrollers of the Currency, including a Senior Deputy Comptroller for National Banks and a Senior Deputy Comptroller for Thrift Supervision.

Amends the Federal Deposit Insurance Act (FDIA) to place the Chairman of the Federal Reserve Board on the Board of Directors of the Federal Deposit Insurance Corporation (FDIC) in lieu of the Director of the Office of Thrift Supervision.

Amends the Bank Holding Company Act of 1956 to prescribe requirements for the treatment of industrial loan companies, savings associations, special purpose holding companies, and certain other companies.

Prohibits certain conversions of troubled banks and thrifts.

Amends the FDIA to revise requirements for calculating a depository institution’s assessment.

Credit Risk Retention Act of 2009 – Amends the Securities Act of 1933 to direct the appropriate federal financial regulatory agencies to prescribe regulations to require any creditor to retain an economic interest in a material portion of the credit risk of any loan the creditor transfers, sells, or conveys to a third party, including for the purpose of including such loan in a pool of loans backing an issuance of asset-backed securities.

Dissolution Authority for Large, Interconnected Financial Companies Act of 2009 – Prescribes a procedure under which the Secretary shall appoint the FDIC as receiver for one year to resolve, liquidate, or take other specified emergency stabilization actions with respect to a financial company whose imminent or actual default would have serious adverse effects on financial stability or economic conditions in the United States.

Requires the FDIC Inspector General, if the Secretary appoints the FDIC as receiver for a financial company, to establish an Office of Resolution to audit and investigate the activities of the FDIC in its capacity as receiver for that company.

Amends the Federal Reserve Act to prescribe requirements for financial crisis management actions by the Federal Reserve Board in the event of a liquidity event that could destabilize the U.S. financial system.

Establishes a Council of Inspectors General on Financial Oversight.

Amends the International Banking Act of 1978 to authorize the Federal Reserve Board to terminate the activities of the U.S. branch, agency, or subsidiary of a foreign bank that presents a systemic risk to the United States.

Corporate and Financial Institution Compensation Fairness Act of 2009 – Amends the Securities Exchange Act of 1934 to require a separate, non-binding shareholder vote to approve the compensation, including golden parachute compensation, of corporate and financial institution executives. Requires each member of the compensation committee of the board of directors of an issuer of securities to be independent.

Over-the-Counter Derivatives Markets Act of 2009 – Amends the Commodity Exchange Act to require joint regulation of swap markets by the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC).

Requires swap repositories, swap dealers, major swap participants, and swap execution facilities to register with the CFTC.

Repeals the exemption from CFTC regulation of derivatives transaction execution facilities and boards of trade.

Revises requirements for foreign boards of trade.

Authorizes the CFTC and the SEC to ban: (1) abusive swaps; and (2) access to the U.S. financial system of any entity domiciled in a foreign country whose regulation of swaps or security-based swaps markets in that country undermines the stability of the U.S. financial system.

Amends the Securities Exchange Act of 1934 to repeal the prohibition on regulation of security-based swaps and applies specified requirements to such swaps.

Consumer Financial Protection Agency Act of 2009 – Establishes the Co
nsumer Financial Protection Agency (CFPA) as an independent agency to regulate the provision of consumer financial products or services.

Prescribes related requirements for examination and enforcement for small insured depository institutions (with total assets of $10 billion or less) by the FDIC and credit unions (with total assets of $1.5 billion or less) by the National Credit Union Administration (NCUA).

Directs the CFPA to develop risk-based programs to supervise nondepository covered persons.

Authorizes the CFPA to take actions to prohibit unfair, deceptive, or abusive acts or practices in connection with any transaction with a consumer for, or any offering of, a consumer financial product or service.

Specifies prohibited acts.

Requires the CFPA Director to lead a Negotiated Rulemaking Committee to promulgate appraisal independence requirements for residential loan purposes.

Specifies the preservation of the civil enforcement powers of state attorneys general.

Prescribes standards for federal preemption of state law regarding national banks and subsidiaries and federal savings associations.

Specifies CFPA enforcement powers.

Transfers to the CFPA the consumer financial protection functions of the Federal Reserve Board, the Comptroller of the Currency, the Office of Thrift Supervision, the FDIC, the Federal Trade Commission, the NCUA, and the Secretary of Housing and Urban Development (HUD).

Prescribes requirements for the collection and use by the CFPA of deposit account and small business data.

Requires the CFPA Director to conduct an annual financial autopsy regarding bankruptcies and foreclosures, including any specific financial products or services that have caused substantial numbers of them.

Private Fund Investment Advisers Registration Act of 2009 – Amends the Investment Advisers Act of 1940 to require private fund investment advisers to register with the SEC and maintain records and make reports on systemic risk data. Exempts venture capital fund advisers from the registration requirements. Directs the SEC to exempt from registration requirements any investment adviser of a private fund with assets under management in the United States of less than $150 million.

Accountability and Transparency in Rating Agencies Act of 2009 – Amends the Securities Exchange Act of 1934 to revise requirements for regulation of nationally recognized statistical rating organizations (NRSROs). Requires the SEC to examine NRSRO credit ratings to review whether an NRSRO has established a system of internal controls and adhered to it.

Directs the SEC to: (1) establish an office to administer SEC rules with respect to NRSRO practices; and (2) eliminate the exemption of NRSROs from the Fair Disclosure Rule.

Directs the SEC to establish a Credit Ratings Agency Advisory Board.

Investor Protection Act of 2009 – Amends the Securities Exchange Act of 1934 to establish an Investor Advisory Committee to the SEC. Authorizes the SEC to engage in consumer testing.

Amends the Securities Exchange Act of 1934 and the Investment Advisers Act of 1940 to direct the SEC to promulgate rules to prescribe a fiduciary standard of conduct for a broker or dealer when providing personalized investment advice about securities to a retail customer.

Authorizes the SEC to prohibit or limit agreements that require customers or clients of any broker, dealer, or municipal securities dealer to engage in pre-dispute arbitration.

Establishes within the SEC a Capital Markets Safety Board.

Directs the SEC to report to specified congressional committees on the implementation of SEC reforms in the wake of the discovery of fraud by Bernie Madoff.

Authorizes the SEC and the CFTC to form and operate a joint advisory committee.

Prescribes or revises prohibitions and requirements relating to: (1) securities lending; (2) lost and stolen securities; and (3) fingerprinting of personnel of registered securities information processors, national securities exchanges, and national securities associations.

Declares that any condition, stipulation, or provision binding any person to waive compliance with any rule of a self-regulatory organization shall be void.

Directs the Comptroller General to study and report to Congress on the SEC revolving door.

Establishes a Financial Reporting Forum to discuss immediate and long-term issues critical to financial reporting.

Directs the SEC Chairman to appoint an SEC Ombudsman.

Amends the Securities Investor Protection Act of 1970 with respect to, among other specified items, an increased: (1) assessment paid by Securities Investor Protection Corporation (SIPC) members; (2) borrowing limit on Treasury loans; and (3) cash limit of protection.

Amends the Sarbanes-Oxley Act of 2002 with respect to: (1) the Public Company Accounting Oversight (PCAO) Board oversight of auditors of brokers and dealers; and (2) foreign regulatory information sharing, and related matters.

Directs the PCAO Board to appoint an ombudsman.

Directs the SEC to establish a program of grants to states for enhanced protection of seniors from misleading and fraudulent marketing of financial products.

Amends the Securities Exchange Act of 1934 to require municipal financial advisers to register with the SEC.

Federal Insurance Office Act of 2009 – Establishes in the Treasury the Federal Insurance Office (FIO) to: (1) monitor the insurance industry; (2) recommend to the Financial Services Oversight Council that it designate an insurer as one subject to stricter standards; (3) assist in administering the Terrorism Insurance Program; and (4) perform other related duties.

Preempts a state insurance measure only to the extent it: (1) directly results in less favorable treatment of a non-U.S. insurer domiciled in a foreign jurisdiction that is subject to a covered agreement than a U.S. insurer domiciled, licensed, admitted, or otherwise authorized in that state; and (2) is inconsistent with such a covered agreement.

Requires the FIO Director to study and report to specified congressional committees on: (1) the global reinsurance market; and (2) how to modernize and improve the system of insurance regulation in the United States.

There’s lots of stuff in there, some of which has to do with, you know, regulating people and entities which have shown a powerful need for regulation.

The text of President Obama’s weekly radio address (as delivered):

…Over the past two years more than seven million Americans have lost their jobs. Factories and businesses across our country have been shuttered. In one way or another, we’ve all been touched by the worst economic downturn since the Great Depression.

The difficult steps we’ve taken since January have helped to break our fall and begin to get us back on our feet. The economy’s growing again. The flood of job losses we saw at the beginning of this year slowed to a relative trickle last month. These are good signs for the future, but they’re little comfort to all our neighbors who remain out of a job. And my solemn commitment is to work every day, in every way that I can, to push this recovery forward and build a new foundation for our lasting growth and prosperity.

That’s why I announced some additional steps this week to spur private sector hiring. We’ll give an added boost to small businesses across our nation through additional tax cuts and access to lending they desperately need to grow. We’ll rebuild more of our vital infrastructure and promote advanced manufacturing in clean energy to put Americans to work doing the work we need done. And I called for the extension of unemployment insurance and health benefits to help those who have lost their jobs weather these storms until we reach that brighter day.

But even as we dig our way out of this deep hole, it’s important that we address the irresponsibility and recklessness that got us into this mess in the first place.

Some of it was the result of an era of easy credit, when millions of Americans borrowed beyond their means, bought homes they couldn’t afford, and as
sumed that housing prices would always rise and the day of reckoning would never come.

But much of it was due to the irresponsibility of large financial institutions on Wall Street that gambled on risky loans and complex financial products, seeking short-term profits and big bonuses with little regard for long-term consequences. It was, as some put it, risk management without the management. And their actions, in the absence of strong oversight, intensified the cycle of bubble and bust and led to a financial crisis that threatened to bring down the entire economy. It was a disaster that could have been avoided if we’d had clearer rules of the road for Wall Street and actually enforced them.

We can’t change that history. But we have an absolute responsibility to learn from it, and take steps to prevent a repeat of the crisis from which we’re still recovering. And that’s why I’ve proposed a series of financial reforms that would target the abuses we’ve seen and leave us less exposed to the kind of breakdown we just experienced. They would bring new transparency and accountability to the financial markets, so that the kind of risky dealings that sparked the crisis would be fully disclosed and properly regulated. They would give us the tools to ensure that the failure of one large bank or financial institution won’t spread like a virus throughout the entire financial system. Because we should never again find ourselves in the position in which our only choices are bailing out banks or letting our economy collapse. And they would consolidate the consumer protection functions currently spread across half a dozen agencies and vest them in a new Consumer Financial Protection Agency. This agency would have the authority to put an end to misleading and dishonest practices by banks and institutions that market financial products like credit cards and debit cards, mortgage and auto and payday loans. These are all common sense reforms that respond to the obvious problems exposed by the financial crisis.

But, as we’ve learned so many times before common sense doesn’t always prevail in Washington. Just this week Republican leaders in the House summoned more than a hundred key lobbyists for the financial industry to a pep rally and urged them to redouble their efforts to block meaningful financial reform, not that they needed the encouragement. The industry has already spent more than three hundred million dollars on lobbying to influence the debate this year.

The special interests and their agents in Congress claim that reforms like the Consumer Financial Protection Agency will stifle consumer choice and that updated rules and oversight will frustrate innovation in the financial markets.  But Americans don’t choose to be victimized by mysterious fees, changing terms, and pages and pages of fine print. And while innovation should be encouraged, risky schemes that threaten our entire economy should not. We can’t afford to let the same phony arguments and bad habits of Washington kill financial reform and leave American consumers and our economy vulnerable to another melt down.

Yesterday the House passed comprehensive reform legislation that incorporates many of the essential changes we need and the Senate Banking Committee is working on its own package of reforms. I urge both houses to act as quickly as possible to pass real reform that restores free and fair markets in which recklessness and greed are thwarted, and hard work, responsibility, and competition are rewarded – reforms that works for businesses, investors, and consumers alike. That’s how we’ll keep our economy and our institutions strong.  hat’s how we’ll restore a sense of responsibility and accountability to both Wall Street and Washington. And that’s how we’ll safeguard everything the American people are working so hard to build – a broad-based recovery, lasting prosperity, and renewed American Dream. Thanks.

Congressman Ike Skelton’s office issued the following press release:

FOR IMMEDIATE RELEASE

Friday, December 11, 2009

[….]

Skelton Defends Home Town Banks and Their Customers

WASHINGTON, D.C. – Today, Congressman Ike Skelton (D-Mo.) submitted the following statement in the U.S. House of Representatives during debate of H.R. 4173, The Wall Street Reform and Consumer Protection Act.  Discussing his vote against the measure, Congressman Skelton stated:

“While the House bill is well-intentioned and I support much of it, the measure falls short in my goal to target Wall Street without disrupting Main Street banks and bank customers.”

On December 11, 2009, the House approved the measure by a vote of 223 to 202.  Congressman Skelton’s full remarks are set forth below:

______________________________

December 11, 2009

This week, the House has debated legislation that would put in place the most sweeping financial regulations since the Great Depression.  I feel strongly that Congress should enact tough new regulations on Wall Street.  Many big banks and financial institutions, in addition to irresponsible mortgage agents and borrowers, in this country helped cause the financial crisis last year. They did not play by the rules and operated with a “get rich quick” mentality that served their own interests but that had little regard for the interests of the American people.  Federal regulators must be given greater authority to monitor complex financial products and to ensure American taxpayers are never again on the hook for corporate misdeeds that threaten the nation’s entire economy.

But, as important as these new regulations are to our country, Congress must be careful in writing them.  We must focus tough regulations like a laser beam on Wall Street and other bad actors while not wrapping our home town banks into costly and complex sets of new rules. Community banks and credit unions have been playing by the rules for years. They are conservative with their money and did not cause last year’s economic mess. They and their customers ought not pay the price for Wall Street’s misdeeds any more than they, like all Americans, have already been asked to do.

While the House bill is well-intentioned and I support much of it, the measure falls short in my goal to target Wall Street without disrupting Main Street banks and bank customers. In particular, the Consumer Financial Protection Agency, which is created under the legislation, would create a cumbersome set of new requirements for home town banks. These new rules are not fair to community banks and their small town customers, and the legislation could have been written to exclude them.

As the House and Senate continue debating financial regulatory reform, the interests of community banks and credit unions must be given utmost attention. These financial institutions are the heart of family, small business, and farm lending in rural America and will be key to our nation’s economic recovery. Congress ought not punish them for the misdeeds of Wall Street tycoons and irresponsible mortgage lenders. I look forward to working with my Democratic and Republican colleagues to find common ground on this important legislation for America.

– 30 –

You think he’ll vote for the bill that comes out of conference? Maybe so, but I don’t think any of the Congressman’s republican colleagues will join him.

“…Just this week Republican leaders in the House summoned more than a hundred key lobbyists for the financial industry to a pep rally and urged them to redouble their efforts to block meaningful financial reform…”